The difficult economy largely has stymied growth in the green real estate market, but experts remain hopeful consumers’ interest in purchasing environmentally friendly properties will strengthen along with the financial market.
By Meghan Boyer
Consumer interest in the green movement is not a passing trend, with environmentally friendly behavior increasing in many countries worldwide year over year. However, some U.S. consumers’ interest in saving the environment wanes when it begins to affect their pocketbooks, and many will opt for less-expensive options even if more-expensive green opportunities exist.
Environmentally friendly behavior among consumers in 10 of 17 countries has increased over the past year, according to a survey by the National Geographic Society and international polling firm GlobeScan. The Greendex survey measures consumer behaviors that have an impact on the environment, including transportation, household energy and consumption of consumer goods. The United States’ index score reached 45.0 in 2010, a 2.9 percent increase from 43.7 in 2009.
Much of the increase was due to more sustainable behavior in the housing category, in which the survey measures the energy and resources consumed by people’s homes. Americans saw increases in this area as consumers made moves to improve the energy efficiency of their homes, according to survey data.
“Green has definitely started to become a little more mainstream than it was previously,” says Ro Malik, managing broker with Green Brick Realty LLC. Despite that, “we’ve got a long way to go,” he says. Malik’s green-focused real estate firm is less than a year old, but “there are people starting to come to us now.” The new firm, which Malik founded with his partner and the current COO Andrew Kang, is continuing to grow.
While economic and environmental benefits exist in green real estate, a lack of awareness regarding green-building options among buyers and a reluctance among many consumers to spend additional funds upfront in an uncertain economy have slowed growth in the market.
“The crash, the economy, retarded the acceleration of the green movement,” says Mario Greco, founder of The Mario Greco Group at Prudential Rubloff Properties. Greco himself recently installed a geothermal heating system in his home; however, “had we not installed our geothermal system before the crash, I would have gone with a normal HVAC system,” he says.
The residential and nonresidential green-building market likely will more than double from $36 billion to $49 billion in 2009 to an estimated $96 billion to $140 billion in 2013, according to the U.S. Green Building Council. Additionally, an upfront investment of 2 percent in green building results in average life-cycle savings of 20 percent of the total construction costs. Furthermore, sale prices for energy-efficient buildings are as much as 10 percent higher per square foot than conventional buildings, according to the council, which collects green figures from varying sources.
Despite future cost savings and the environmental benefits of green buildings, “people are very cost sensitive right now,” says Marissa Hopkins, a Realtor and EcoBroker with Coldwell Banker Residential in Highland Park.
Indeed, “right now I’m seeing buyers want the cheapest product and don’t care as much about upgrades, be they granite countertops or bamboo floors. They are really, truly focused on the bottom line,” says Greco.
However, if two properties are similar in amenities and price but one has additional green features, a buyer may be more likely to purchase the green home, says Pat Strong, a Green and GRI Realtor with Koenig & Strey Real Living in Northbrook. “It really comes down to cost and value. People want to do the right thing, but it has to be available easily and it has to be affordable,” she says.
Consumers’ concern with the current economy makes it difficult for many of them to justify spending more funds immediately on energy-efficient building options to save some funds in the future. “Buyers are more concerned about keeping their costs as low as possible immediately, as opposed to seeing some sort of gain month after month,” says Greco. Large environmentally friendly systems such as geothermal heating and cooling will cost roughly twice as much to install as a regular system, yet the upfront cost on such a system will be paid back five to seven years in the future because of energy savings, he says.
Due to the fact that it takes multiple years to earn savings off of a large green-system investment, the buyers considering such options typically plan to be in their new properties more than a few years to get the full return on investment, says Greco. The buyers most interested in green real estate also tend to be young families, educated, driven and community focused, adds Malik.
Another hurdle Realtors need to overcome is consumers’ low awareness of green-building options. Consumers’ awareness in Chicagoland is just now beginning to grow, says Malik. Other regions, such as Denver or Seattle, have a greater awareness of green-building options, he notes.
“The problem is that [consumers] are not asking enough about it. I am the one bringing it up more,” says Strong. “It’s our duty to talk about it. The more we talk about it with knowledge, I think that we’ll get to the other side of the hill where more people are asking about it than less … It’s a matter of education. Once it’s presented to people as a way to save money and resources, I think they are two feet in,” she says.
For those that desire additional education and certification, there are two ways to advance environmental knowledge: becoming an EcoBroker or earning a Green designation from the National Association of Realtors. Both options can help Realtors increase their expertise on green building, and potentially boost their sales with green-friendly buyers.
Nationally recognized, EcoBroker is a comprehensive green-training designation for real estate professionals, says Hopkins. “I completed this certification because of my personal interest in living sustainably and to provide greater service and value to my clients,” she says. “The certification furthered my ability to identify homes that save money by being more efficient and lower maintenance, are healthier to live in and conserve our natural resources and environment,” she says.
NAR’s Green designation provides real estate professionals with knowledge and awareness of green-building principles so they can help consumers in purchasing, retrofitting and operating green properties, according to the association. Strong believes that having the designation has helped drive business her way. “It’s awareness and people seeing that you are keeping up with what’s in the market and people seeing you care about it,” she says. “I am getting business from that.”
Keeping up with the market also helps Realtors explain the myriad green choices that exist for consumers. There are many green options available, from energy-efficient heating and cooling systems and appliances to structural features such as windows, says Malik.
“There are a million options,” agrees Hopkins. Green elements could include permeable pavers outside the property that allow water to seep into the ground instead of running into sewer systems, graywater for toilet flushing and siding that does not require regular painting and maintenance, she says.
More people also are becoming interested in deconstruction, where companies that tear down buildings recycle and reuse the various components within them, says Strong. Consumers can purchase and add different elements from the deconstructed buildings to their properties.
Reclaimed floors are an example of reusing elements from a different building, for instance an old barn, says Greco. Consumers also can implement green landscaping elements, such as collecting rainwater for irrigation and planting native species, he says.
The future of green only can improve as the economy strengthens, agree observers. “I think as the economy improves, more people will want to try the green ‘thing,’” Greco says. “It’s the mentality of the market. The buyer and seller are scared to death.”
Indeed, “I don’t think it’s going to wane,” says Strong. “We have to care about what’s going to be happening with the earth. As the technology advances, more people will get involved and likely the price will drop then, too … I just think we all have to care about our earth.”
While sustainability might not be in the forefront of the minds of buyers and sellers right now, the experts agree that it is not completely overshadowed by the current economic crisis. The focus right now may be more on simply getting deals done, but as always, having that extra knowledge and speaking to an audience in an educated manner can never hurt. Despite the naysayers, green appears to still be relevant now, and will only grow as the market returns. C.A.
Mario F. Greco, QSC
The Mario Greco Group – Founded in 2002
Senior Broker and Vice President of Sales
Prudential Rubloff Properties
Green Brick Realty
Pat Strong, GRI, Green, SFR
Koenig & Strey Real Living